Asset Turnover Ratio (Formula, Example) | Calculate Asset Turnover

Описание: In this video, we discuss what is Asset Turnover Ratio, its formula, and examples. We also calculate Asset turnover ratio of companies like Nestle, Colgate, and P&G.

Asset turnover ratio primarily means the total revenue generated per unit of the company's assets.

This means that if a company is able to generate higher asset turnover ratio, then it has a better asset efficiency.

As an example of asset turnover ratio, Retail companies have this ratio at around 2.0x.

Asset turnover ratio calculation can be done using this simple formula

Asset Turnover Ratio Formula = Sales / Average Assets

IF ASSET TURNOVER RATIO is less than 1
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This is not a good situation as teh company is not able to produce enough revenues.

IF ASSET TURNOVER RATIO is greater than 1
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If asset turnover ratio is greater than 1, it’s great. This means the company is able to generate revenues greater than that of the assets.

Asset turnover example of Nestle -
Nestles Sales in 2015 = $92.26 billion
Nestle's average assets (2014 and 2015) = $130.2.
Nestle's asset turnover comes out to be $92.26/130.2 = 0.709x

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